The media and investors prematurely panicked last night when Hewlett-Packard's (HP) results included an operational gaffe (releasing the results while the market was still open), and the news that it would be laying off an additional 11,000-16,000 on top of the 34,000 it has already announced.

Shares initially tanked on the release of the results late yesterday afternoon, but they roared back this morning, up 5% in early trading.

CEO Meg Whitman's turnaround plan will result in total reduction of about 10% of the company -- it had 317,500 people at the end of 2013. Revenue came in flattish, at about $27.3B, slightly below expectations of $27.4B for the second quarter. Quarterly non-GAAP earnings were $0.88 per share, up 1% from the prior-year period, versus the previously provided outlook of $0.85 to $0.89.

So what happened? It seems the initial reaction, especially from the media, was a bit hysterical. I'm on the record as being bullish on the the HP turnaround, and long the stock. These earnings did not worry me one bit.

It's just another mass layoff, folks. This is standard Pg. 2 operating procedure in the turnaround CEO manual.

Let's set aside the fact that mass layoffs are no fun and that Whitman euphemistically referred to firings as “opportunities.” Ten percent of the company is not unreasonable, given its past poor performance.

That's why the stock price is up this morning -- up 5.61%, or $1.78, to $33.57 -- after being prematurely pummeled in the aftermarket last night. The smart money knows that layoffs are always pages 1-3 in the turnaround CEO's playbook.

The bigger question is what's next.

In a macro scale, HP's problems are pretty easy to analyze. Its biggest source of revenues is PCs, and the PC market is flat-to-shrinking, though HP did benefit from a bounce in the PC market during the last year after a Microsoft refresh schedule. HP doesn't have a huge presence in other important areas, such as enterprise cloud software and infrastructure. It plays second-fiddle to Cisco Systems in networking. Its moves in mobile are questionable. For example, introducing a sub-$100 tablet is probably not the answer to its problems.

So what's the next page Whitman is going to pull out of her playbook?

The answer, I believe, lies in cloud computing and enterprise software, areas in which HP is weak, but has opportunity. It recently made a play in the cloud area by announcing its Helion line of products and services. I discussed those moves here.

Helion is a tiny move in the vast HP empire, but it hints at the future. Embracing open technologies and provided value-added services on top of them is the future of Information Technology (IT). Another route for HP to take is to make some strategic acquisitions in some fundamentally strong technology areas, such as security and data analytics.

Yes, OpenStack and Software Defined Networking (SDN) are important areas for HP. The future is open source. Because it has a minor market share in these areas, it can afford to take the risks that the Cisco's of the world cannot.

HP and Whitman have time -- but not too much time. HP's cash balance is $15B in the quarter, up from $13B last year, and it's still making plenty of money. For fiscal 2014, HP estimates non-GAAP net EPS in the range of $3.63-$3.75, excluding special charges.

Let's say Whitman and HP can get back to earning $4 a share. With a P/E of 12, that is a $48 share price. At a P/E of 15, if it were growing again, you'd get $60. With the stock currently trading at around $34, HP shares are still cheap and there is plenty of upside if Whitman is even modestly successful at returning the company to growth.

[Disclosure: Long HPQ]